New research from flood modeling specialists Fathom reveals a worrying preparedness gap in the global insurance sector. While climate-related disasters now account for over 70% of insured catastrophe losses, only about a third of major insurers have established dedicated committees to address these growing risks.
The comprehensive study analyzed governance structures at 200 leading insurers worldwide, uncovering several critical vulnerabilities in how the industry manages climate threats. Reinsurance companies show the most progress with 70% having specialized climate committees, but life insurers trail significantly at just 23% adoption.
“Insurers are essentially betting against climate science in their governance structures,” warned the lead Fathom researcher. The analysis identified three dangerous blind spots in current approaches:
Most insurers continue relying on historical loss data rather than forward-looking climate models, leaving them vulnerable to unprecedented events. Product development hasn’t kept pace with changing risks – only 15% of offerings incorporate climate adaptation features. Perhaps most alarmingly, 85% of insurance boards lack members with professional climate expertise.
The consequences of this inertia are already appearing in underwriting results. Companies using traditional risk models have been caught off guard by the increasing frequency of secondary perils like wildfires and flash floods. Investment portfolios heavy in carbon-intensive assets face growing climate transition risks as well.
Regulatory pressures are mounting across major markets. The EU’s Corporate Sustainability Reporting Directive now requires detailed climate risk disclosures, while U.S. regulators are increasing scrutiny of insurers’ climate preparedness. Forward-thinking firms like Swiss Re and AXA have responded by not only forming expert climate committees but also developing innovative products like parametric flood insurance and resilience-focused coverage options.
The insurance sector’s slow adaptation is particularly surprising given its traditional role as a risk management leader. As climate impacts accelerate, the window for proactive measures is closing rapidly. Companies that fail to elevate climate risk governance may find themselves dangerously exposed in an era of rising seas and intensifying storms.
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